15.660 Strategic Human Resource Management15.660 Strategic Human Resource ManagementMIT Sloan School of ManagementFred ReichheldDirector, BainThe Loyalty EffectHBS Press, 1996 The Loyalty Effect...• A consulting study of a trucking company showed that reducing driver turnover 50% could increaseprofits by 50%• A study of brokerage companies showed that increasing broker retention by 10% increased broker value by 155%.• A study of retail stores showed that stores in the topthird of employee retention were also in the top thirdin productivity with 22% higher sales per employee.• Fast food stores with low turnover had profit margins50 % higher than stores with high turnover.Why Long-Term Employees Create Value1. Training: Wages paid during the training period yield little or no return. For long-term employees,training becomes a net benefit.2. Efficiency:Long-term employees are more efficient,require less supervision, and may be more motivated.3. Customers: Loyal employees are better at identifying,serving, and retaining the best customers. They areoften a major source customer referrals.4. Employee Referral:Long-term employees often generatethe best flow of high-caliber job
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